Buying and Selling pre-owned Cisco equipment

Gray turning into Green

This year I noticed a big change among my customers in the perception of buying used equipment.
So far I was always confronted with a prejudice that used equipment is 'ugly', 'gray' ,'old' and not matching with career ambitions in the NOC and IT departments.

However, some issues on our big planet have re-assessed the value of used networking equipment.
The financial crisis and the resulted impact on the economy have accelerated an underlying behavioral change caused by the global warming and our environmental problems.

Suddenly, Green is 'hot', Green is 'trendy', Green is 'cool' and Green is 'responsible' ,'necessary' (= good for your career) and Green is 'saving money'.
Every time I make a call to a prospect and I drop the word "Green" it works like magic. People listen to this concept I have been selling already for seven years now as if I invented it yesterday....

"Long live the crisis" is something I hear quite often in our business. A crisis forces new ideas and stimulates invention. That is what was needed in our business.
On the other hand...sometimes these new ideas can work against you......I already feel sorry for my good old Cadillac....his colour has gone from green over gray to black now......:-)

Is a choice for "used" a choice against Cisco?

Today one of my customers was struggling with the question if choosing to buy used Cisco equipment instead of new Cisco equipment would be a choice against Cisco.

I have been confronted over the past few years multiple times with that thought.
Always considered it a bit unusual question since I am selling Cisco equipment myself.....
But, on the other hand it is an indication that my customer has a tight direct relationship with Cisco and is afraid of harming that relationship by buying on the used market. That I can understand.
(Please take note that this discussion usually only happens talking about a relationship between Cisco and Telecom operators/Carriers -the more demanding Cisco customers-).

To start off I can put both of them at ease immediately since I am selling Cisco myself and have no intention of replacing the relationship with Cisco direct. On the contrary, I encourage my customers to keep having a good and tight relationship with Cisco. E.g.there can always be technology dependencies that could require direct support from Cisco product engineers (think about upgrading your backbone as a carrier from 10Gig to 40Gig or - in the near future -100Gig).

Having said that you will maximize most from this technology relationship with Cisco if you can spend the bigger part of your budget for networking equipment on the latest technologies.
This is where I can help.

For example many projects are still based on Fast Ethernet and Gigabit Ethernet technologies. The price per Gigabit connection is at an alltime low on the used market. Not to speak from Fast Ethernet.
Here is where Cisco is taking the benefits from you buying on the used market.

Instead of fighting on price against low cost brands (3COM/Nortel etc) my customers have decided to continue buying Cisco accros the board , also on the low end of the market. But for the price of 3COM/Nortel. They are still saving money for the budget to be spent on latest Cisco technologies, but have not compromised on low end technologies from other vendors and are able to stay consistent with the Cisco platform, the most stable platform available. Additional savings on training, maintenance etc. for new brands are here achieved as well.

And - to make the best out of your budget - look at your spares and spare management. So easy to buy " used " equipment as a spare and save extra bucks to invest in newer Cisco technologies....

Again: is "used" a choice against Cisco?
Absolutely not!

On the contrary, I dare say that the used market is strategically important to Cisco.
(It is not without reason that Cisco is promoting more and more their own - limited - offerings of used equipment)

And what to think about all those CCIE and CCNA Cisco trainees? The used market is providing them an affordable platform for buying their Cisco equipment needed to do their homework.
And who is benefiting from all those engineers passing their exams with the help of used Cisco equipment? Exactly! Another strategic role for the used Cisco market.

But there is another area where the market for used Cisco equipment is making a major contribution to a successful relationship of Cisco with the customer.
Success often will be measured by customers for a big part on the completion of projects, within the expectations set. Availability of Cisco products on short notice is key.

How often does it not happen that Cisco distribution is having shipping delays, System Integrators ordered the wrong equipment or forgot to order some equipment and so on and so on.
In those situations you need a Plan B : the market for used (or also pre-owned) Cisco equipment.

On this global market place you will find almost every item somewhere in stock and available to the project within a few days (sometimes only hours). I can already see the happy face of a Project Manager who scheduled a few engineers to complete a project , but missed a couple of GBICs on his BOM....and now got it overnight from some warehouse of a reseller for used equipment.
I personally believe this is even more strategic than what I mentioned before, to a successful relationship of Cisco with their customers.

And yes - it is obvious but I will say it anyway -, always make sure you are dealing with a reliable source for Cisco equipment. On the independant market (outside of the Cisco Channel) several initiatives are in place to help you there. I will discuss this in one of my next weblogs.

Concluding: a choice for "used Cisco" is a choice for Cisco and for your Cisco relationship!

Is used networking equipment still having any VALUE?

Very often I get this question thrown in my direction: is this router or switch - that is already so many years in production - still having any value? Are there people still interested in this End-of-Life equipment?
The answer almost every time is a clear YES.

However, the market value is not always in line with the residual value according to the CAPEX (Capital Expenditures) Accounting rules in companies.
There are still companies who take 7 years or around to write off the investments in these products, whereas technology developments are forcing companies often to upgrade their network already after 3 years (or in some industries even shorter than that).
Since market for used products is not following CAPEX rules some companies could be disappointed about the value for their networking products that they can get after 3 years.

(I will not start a topic on CAPEX vs OPEX (Operating Expenditures) here. There are many others who have a blog about that. )

So, if market value is not following the accounting rules, what is determining the value of used networking equipment? Is it age?
Not really. What does the age of a card say? Let us look at an example:
Company A buys a PA-A3-OC3SMI (Enhanced ATM Port Adapter) card for a Cisco7206 router in 2003 and Company B buys the same card in 2004. Both cards will have the same market value in 2009.
Why? Age does not say anything about the quality of a module. What would you prefer to have: a module that has been in operation for 5 years and fully working or a module that has been on the shelf for 4 years as a spare but has never been working in operation?
When buying equipment these factors will serve as a nice "packaging" but have zero influence on the value of the product.

Knowing that "write offs" and "age" have no impact, is there nothing that can help to differentiate the price?
Yes, there is.
Let us go back to the same example. At some point of time the PA-A3-OC3SMI modules had to support the just released 7206VXR chassis instead of the End-of-Sale going Cisco7206 (non-VXR). This required a specific Hardware-Version of the module (2.0 or higher to be exact).
This results in a market value for the modules with HW 2.0 or higher that is triple the value of the HW version that is below 2.0. Here we go...

But another question rises: why triple the value ? why not double? or 10% more? or 5 times more?
This is touching the key area of market value: Supply and Demand.
Wit the 7206 (non-VXR) going End-of-Sale/End-of-Life everybody started to trade in these routers for the VXR-versions. Automatically the demand for the PA-A3-OC3SMI with HW 2.0 started to explode (and hardly any available on the market), whereas at the same time everybody is throwing away their PA-A3-OC3SMI with HW versions below 2.0. Market is swamped with these and prices fall to all time lows.

If you apply this example to the more than 70,000 (?) products that Cisco has been selling you start to begin to see the picture of the dynamics on the market for used Cisco equipment....Supply and Demand is all that matters to determine the Market Value of a used item and of course many factors influence both sides of the coin (distribution/channel issues, technology standards, project implementation issues, etc etc) so prices can go up and down in a short time.